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Red flags for construction sector as growth continues to slow

Growth among construction SMEs slowed in most parts of the UK in the third quarter of this year, according to the Federation of Master Builders (FMB).

Key results from the FMB’s latest State of Trade Survey, a quarterly assessment of the UK-wide SME construction sector, found that

· Q3 2017 was the 18th consecutive quarter of positive growth which means that the UK’s construction SME sector has been growing for four and a half years (i.e. since Q2 2013);

· 41% of construction SMEs predict rising workloads in the coming three months, down from 48% in the previous quarter;

· 82% of builders believe that material prices will rise in the next six months;

· 61% of construction SMEs are struggling to hire carpenters and joiners and 59% are struggling to hire bricklayers;

· Over half (58%) of construction SMEs expect salaries and wages to increase in the next six months.

Discussing the findings, Brian Berry, the Chief Executive of the FMB, commented: “Material price hikes and skills shortages are putting the brakes on growth among the UK’s small building firms. Now that the General Election is well and truly behind us, it was our hope that consumer confidence would spring back and spur growth among small building firms in the third quarter of this year. However, our latest research shows that rising costs are dampening the performance of construction SMEs. The spike in salaries is a direct result of the ever-worsening skills shortage in our sector. It’s a simple consequence of supply and demand – construction workers know their worth and given the scarcity of skilled tradespeople, these individuals are understandably demanding higher wages from their employers. Indeed, nearly two thirds of construction SMEs are struggling to hire carpenters and joiners which has now surpassed bricklayers as the trade in shortest supply.”

Berry concluded: “Although the SME construction sector is still growing, the Government needs to keep a watchful eye on this slowdown in growth. Construction is a strategic industry and without it, the Government will be unable to build the homes, schools, hospitals, roads and railways it needs. With Brexit on the horizon, the Government must keep the needs of the construction industry in mind as it negotiates the UK’s departure from the EU. In particular, Ministers must work closely with the sector to develop a post-Brexit immigration system that works for construction and a transition period that allows us to gradually reduce our reliance on EU migrant workers. On the domestic front, we are urging the Housing Minister to turbo-charge the SME house building sector by fully implementing the proposals in the Government’s Housing White Paper which was published back in February. Eight months on, our sector is crying out for the very sensible proposals aimed at removing barriers to SMEs so we can once again get Britain building en masse.”